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Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts

  • Charles W. Calomiris
  • Donna M. Hitscherich

We analyze data on fees paid to investment bankers and acquisition premia paid for targets in cash tender offers. Our results are broadly consistent with the predictions of a benign view of the role of investment banks in advising acquisition targets. Fees to investment banks are correlated with attributes of transactions and target firms in ways that make sense if banks are being paid for processing information. The more contingent (and, therefore, risky) the fees, the higher they tend to be, all else held constant. Variation in acquisition premia also can be explained by fundamental deal attributes. Contrary to the jaundiced view of fairness opinions, greater fixity of fees is not associated with higher acquisition premia, and there is no evidence that investment banks are suborned by acquirors with whom they have had a prior banking relationship.

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File URL: http://www.nber.org/papers/w11333.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11333.

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Date of creation: May 2005
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Publication status: published as Calomiris, Charles W. and Donna M. Hitscherich. “Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts.” Journal of Empirical Legal Studies 4 (December 2007): 909-38.
Handle: RePEc:nbr:nberwo:11333
Note: CF
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